Safe and Sound

Five Star Bank

Rocklin, CA
5
Star Rating
Five Star Bank is an FDIC-insured bank started in 1999 and currently headquartered in Rocklin, CA. Regulatory filings show the bank having equity of $79.3 million on $921,157,000 in assets, as of June 30, 2017.

Thanks to the work of 82 full-time employees in 6 offices in CA, the bank currently holds loans and leases worth $702.6 million, including real estate loans of $621.3 million. U.S. bank customers currently have $839.4 million in deposits with the bank.

Overall, Bankrate believes that, as of June 30, 2017, Five Star Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and affords protection for depositors during periods of financial instability for the bank. Therefore, a bank's level of capital is a key measurement of a bank's financial strength. When it comes to safety and soundness, more capital is better.
On our test to measure capital adequacy, Five Star Bank received a score of 8 out of a possible 30 points, less than the national average of 13.38.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Five Star Bank's Tier 1 capital ratio was 10.11 percent, exceeding the 6 percent level considered adequate by regulators, but less than the national average of 25.16 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Five Star Bank held equity amounting to 8.61 percent of its assets, which was lower than the national average of 12.10 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of problem assets, such as unpaid loans, on the bank's loan loss reserves and overall capitalization.

A bank with large numbers of these types of assets could eventually be required to use capital to absorb losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Five Star Bank scored 40 out of a possible 40 points on Bankrate's test of asset quality, beating the national average of 37.62.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of June 30, 2017, 0.36 percent of Five Star Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.04 percent.

Banks maintain a reserve to handle problem assets known as an "allowance for loan and lease losses." Comparing the the size of that reserve to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Five Star Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, boosting its capital buffer, or put them to work addressing problematic loans, likely making the bank better able to withstand financial shocks. Losses, on the other hand, lessen a bank's ability to do those things.

On Bankrate's earnings test, Five Star Bank scored 30 out of a possible 30, exceeding the national average of 16.52.

One key measure of a bank's earnings is return on equity, or net income (essentially profit) divided by total equity. The most recent annualized quarterly return on equity for Five Star Bank was 26.20 percent, above the national average of 9.28 percent.

For the twelve months ended June 30, 2017, the bank recorded net income of $10.2 million on total equity of $79.3 million. The bank had an annualized return on average assets, or ROA, of 2.33 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.14 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.